Faberge owner Gemfields said on Tuesday that it is recommending its shareholders accept a takeover offer by China's Fosun, despite branding the bid "not fair and reasonable" as the other offer from Pallinghurt is "derisory".
At the end of last month, Gemfields said Pallinghurst's offer for the remaining 52.9% of the group it doesn't already own "significantly undervalues the company, its unique asset base and its leading position in the coloured gemstone sector". The offer valued each Gemfields share at 38.5p and the entire issued and to be issued share capital of Gemfields at around £211.5m.
However, on Tuesday Fosun made a firm offer for the company at 45p per share in cash, up from a previous offer of 40.85p per share and valuing the group at approximately £256m. The offer represents a premium of 18.2% to Gemfields' share price on 18 May, which was the last business day before the announcement of the Pallinghurst offer.
Fosun's chief executive officer Wang Qunbin said: "We have been persistently looking for investment opportunities which can combine global resources with China's growth momentum and further develop industries related to health, happiness and wealth. We are attracted by Gemfields' professional management team and Gemfields' long-term business potential, in particular in the China market."
Although it showed no enthusiasm for either of the offers, Gemfields opted for the more attractive of the two.
"The Independent Committee of Gemfields, who have been so advised by J.P. Morgan Cazenove as to the financial terms of the Fosun offer, consider that the financial terms of the Fosun Offer are not fair and reasonable.
"Notwithstanding the above, the Independent Committee are of the belief that the certain cash exit on offer from Fosun Gold is materially more attractive than the unsolicited all-share nil-premium offer from Pallinghurst announced on 19 May 2017."
Pallinghurst has already secured enough acceptances from Gemfields shareholders to reach the 75% threshold that would enable it to delist the company from AIM, but the undertakings cease to be binding in certain circumstances where there is a rival firm offer at a greater than 10% premium.
"Given the challenges that the unsolicited Pallinghurst offer poses to the independent future of the company and given the derisory nature of the unsolicited Pallinghurst offer, the Independent Committee intend to recommend that shareholders accept the Fosun offer so as to secure a relatively more attractive outcome for their investment."
At 1455 BST, Gemfields shares
were up 4.6% to 42.50p.